Monday, May 31, 2010

Sustainability ... an inadequate idea!

What is sustainability ... is it really something that should be a top talking point, or is there something better that would help clarify what is important in socio-economic performance.

Clearly there are some aspects of society that are not "sustainable" especially in the long run ... but as Keynes is reported to have said "In the long run, we are dead!" People are just not going to get serious about things that are only going to become critical in the long run, when this generation of decision makers are long dead.

I argue that the discussion about "sustainable" should be replaced by or at least supplemented with something that talks more about value analysis ... vanalysis ... associated with the item or the process ... and the value efficiency ... vefficiency!

When only money profit is driving decision making to the exclusion of all else, the decisions are unlikely to be those that are favorable to society as a whole ... for this it is critical that there is value analysis ... vanalysis, as well. There should be accountability not only for decision makers to achieve profit, but for decision makers to show value adding from vanalysis reporting.

Value analysis ... vanalysis ... includes some of the ideas of sustainability ... but it is value efficiency ... vefficiency ... more than sustainability that is likely to facilitate the behavior changes that are needed.

Are soft drink companies "green" and sustainable or not ... where do these big global companies that manufacture and market soft drinks rank in sustainability and in vefficiency. How do these companies compare to municipal water supply organizations? It is impressive how profit has motivated the soft drink manufacturers to get distribution into even the most remote rural areas ... and conversely how many places still do not have good potable municipal water supplies. By comparing the results of vanalysis for soft drinks and for potable municipal water it is clear that allocation of resources needs to change.

There needs to be a comprehensive system of value metrics so that people ... civil society ... are able to differentiate between the what matters and what does not ... and be able to tell the difference between policy options. With market economics we have chosen soft drinks over improved potable water supply systems and sanitation because soft drinks make profit and these other initiatives have not been organized to be profitable ... and I would argue this is the right decision. But the fact of these organizations being in the not for profit sector does not mean that they are not valuable ... and it is clear that the metrics of value should be being reported and taken into consideration when decisions are being made about the allocation of resources.

In the distant past the health of the population of London was at risk from cholera ... and when the reason for cholera was identified, the policy decision was made to build a storm sewer system that would ensure that no sewage ever flowed into the River Thames. This initiative solved the cholera problem in London ... and has worked for more than 150 years. A better solution arguably than shipping in bottled water from a soft drinks company ... not profitable but very valuable. I consider this to be a great example of value based decision making ... but this sort of analysis is not being done in the modern capital markets because the key value metrics are not in play.

Sustainable concrete ... not a particularly clear idea! But there is concrete that is vefficient and concrete that is less vefficient. Vefficiency is about using less resources to produce the concrete ... and for the concrete to last longer ... but any concrete uses resources, and anything that uses resources is, at the limit, not sustainable.

About Me

Read engineering and economics at Cambridge ... qualified as a Chartered Accountant ... professional and corporate management working on management information and metrics of performance. International assignments as CFO and then as consultant to World Bank and UN agencies in connection with development projects and emergency situations. Work on planning at the national, area, sector and community level. Appalled at the current state of financial reporting in the corporate world and the metrics that drive major decisions in both the corporate and political sphere! The development of Community Analytics (CA) is a response to the need for better metrics than merely money accounting ... the concept of value should be treated with equal rigor and sophistication!